There is a saying, “It takes one to know one.” I am a convicted felon, former CPA, and former criminal CFO of Crazy Eddie. Today, I teach law enforcement agencies, professionals, and businesses how to identify fraud and train them to catch the crooks. This blog investigates white-collar crime, securities fraud, accounting irregularities, corruption, and other related topics. Accounting irregularities investigated by me are referred to appropriate government agencies as a whistleblower.

Monday, March 29, 2010

Oliver Stone should take note. We may have the makings of "Wall Street 3." I am just kidding about the movie idea, but very serious about InterOil's and John Thomas Financial's misconduct uncovered so far.

Fraud Discovery Institute (co-founded by convicted felon, turned fraud buster and short seller) Barry Minkow, iBusiness Reporting blog (a division of Fraud Discovery written by former LA Times investigative journalist, turned blogger and short seller William Lobdell), and this blog plan to continue our respective investigations and document misconduct at InterOil and John Thomas Financial.

There is a saying, "It takes one to know one." Plenty of what is going on with InterOil and John Thomas Financial reminds Minkow and me of our own felonious pasts as we continue to uncover patterns of inadequate, inconsistent, misleading, false, and contradictory disclosures by InterOil and John Thomas Financial.

Below is a summary of last week's unfolding events as quoted from various sources, media, and blogs. My additional commentary follows.

March 25, 2010: New York Post - Shia's 'slick' tip: Actor LaBeouf continues broker role off camera by Kaja Whitehouse

Actor Shia LaBeouf appears to be taking his role as Gordon Gekko's protégé in the upcoming "Wall Street" movie a little too seriously.

After preparing for his turn as a hedge-fund trader by visiting trading floors of small brokerage houses, LaBeouf in the April issue of GQ talked up the stock of an oil and natural gas exploration company that has yet to produce any of either.

"IOC's momentum is major, and it will surprise to the upside," LaBeouf said in a text message to the GQ article's author, Adam Sachs, using the trader lingo he apparently picked up while prepping for the film.

The 23-year-old star of the "Transformers" franchise was referring to InterOil, a Canadian firm with the New York Stock Exchange ticker symbol IOC that says it's searching for natural gas and oil in Papua New Guinea.

However, after seven years of exploration and drilling, InterOil has yet to produce any proven commercial oil or gas reserves.

Nevertheless, InterOil's stock is up an astounding 385 percent since the start of 2009 -- a feat critics attribute to InterOil's flurry of uplifting press releases about its drilling and exploration plans.

[Snip]

LaBeouf in the GQ article boasted that his apparent training at trading stocks helped him parlay $20,000 into $450,000

Apparently, Shia LeBeouf learned about InterOil from John Thomas Financial. It would be interesting to find out what he knew, when he knew it, and if he traded any InterOil shares. Maybe he can provide details on how John Thomas Financial pushed InterOil shares on it's customers? Afterall, LeBeouf learned about how the underbelly of Wall Street operates from John Thomas Financial and other firms to prepare for his leading role in the movie.

For more details, please read my full blog post entitled, "InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme." In that blog post, I documented how InterOil filed a false report with the Securities and Exchange Commission claiming that the company paid no fees for a $95 million convertible debt offering. However, documents submitted in a court case show that Clarion Finanz (a major shareholder of InterOil) had in fact received $5.7 million in fees.

Those same court documents show that InterOil concealed John Thomas Financial's and banned stock promoter Carl Caserta's role in the debt offering. About a year earlier, InterOil told the New York Times that it was not doing business with Caserta.

That deception enabled John Thomas Financial analyst Wayne Kaufman to appear on CNBC and recommend InterOil's stock without accurately disclosing his company's conflict of interest from their prior investment banking relationship with InterOil. John Thomas Financial heavily promoted Wayne Kaufman's CNBC appearance to pump InterOil stock to its customers without disclosing its prior investment banking relationship with InterOil.

Over the next couple of weeks, InterOil shares rose dramatically and the company was able to force the conversion of its debt to equity.

This Shia LaBeouf kid is apparently trying his best to make sure that any enthusiasm for the Wall Street sequel is completely drained by the time it hits theaters.

With every puff piece on how he's shown himself a 2000% return in his personal stock trading account, more eyes roll and more sighs of disappointment can be heard amongst the film's would-be core audience - Wall Street itself.

The latest ridiculousness involves Shia's pumping of an experimental oil stock that has no earnings from oil exploration or production of any kind as yet...

[Snip]

Kid, can you just talk about your movie and stop digging your credibility hole any deeper? You seem like a nice guy and no one is rooting against you. When you read this stuff you're saying five years from now, you're going to cringe in embarrassment like the rest of us are doing as we speak.

Try to be a little more Sheen-like circa 1987...in other words, just be cool.

March 25, 2010 - Economic Policy Journal - Shia LaBeouf Caught Up In Rumors He Is Touting a Possibly Edgy Stock by Robert Wenzel

Shia LaBeouf trained at John Thomas Financial to study for his role in the upcoming Oliver Stone/Michael Douglas motion picture "Wall Street 2: Money Never Sleeps," according to Sam Antar, former Crazy Eddie fraudster, turned fraud buster.

March 26, 2010: iBiz Reporting - Company controlled by InterOil CEO files 'bad faith' bankruptcy; Mulacek dumps nearly $1.5 million in stock 2 days before filing for federal protection; tries to derail civil fraud case that seeks up to $1.3 billion in damages and could be 'devastating' to InterOil by William Lobdell

A company controlled by Phil Mulacek, chief executive officer of InterOil Corp. (NYSE: IOC), filed a "bad-faith" federal bankruptcy in December in an attempt to derail a potentially massive civil judgment in a fraud case against him and companies he controls, according to court documents filed in Houston.

Less than a month after the filing, federal Judge Marvin Isgur in Houston ruled that Nikiski Partners—a corporation whose $2 million investment in a used oil refinery gave birth to InterOil, one of Wall St.’s high-flying stocks in 2009—had filed the bankruptcy in “bad faith.” (Read transcript here.)

Two days before filing for bankruptcy, Mulacek, through his holdings in Nikiski Partners, dumped nearly $1.5 million worth of InterOil stock, according to the Canadian Securities Commissions.

March 26, 2010: Fraud Discovery Institute - Is InterOil (NYSE: IOC) Built on a foundation of fraud? by Barry Minkow

A potentially massive lawsuit by many of InterOil Corporation's (NYSE: IOC) original investors, who are seeking up to $1.3 billion in damages, worried company CEO Phil E. Mulacek so much that a certain company he controls filed a bad-faith bankruptcy in an apparent attempt to derail litigation set for trial this May. In fact, federal Judge Marvin Isgur said that Mulacek's credibility "diminished" by building a key argument in bankruptcy papers upon a lie.

In a special report released today by iBusiness Reporting ('http://www.ibizreporting.com') - a division of the Fraud Discovery Institute Inc., former Los Angeles Times journalist William Lobdell details stunning allegations made by about 20 original investors in what is now InterOil. Among the claims: InterOil CEO Phil Mulacek forged documents, secretly created a shadowy Bahamian company, and ignored "crippling conflicts of interest" in order to enrich family, friends and himself.

So desperate was Mulacek to evade the consequences of his actions relating to a case going to trial this May, that he filed bankruptcy for a company he controls in what seems an attempt to derail the lawsuit, which is asking up to $1.3 billion in derivative or stockholder claims.

In one candid admission, Mulacek and his attorneys testified that even a $50 million judgment for the plaintiffs would be "devastating" to InterOil.

March 26, 2010: White Collar Fraud - Is InterOil Built on a Foundation of Fraud? by Sam E. Antar

When a company like InterOil starts on a corrupt foundation, everything that follows continues to be corrupt. In many ways, Phil Mulacek's transgressions against investors remind me of me, back in my criminal days at Crazy Eddie. We both exploited the hopes of our investors with "spin and lies." During its entire existence, InterOil has issued an endless string of press releases hyping its future prospects and selling hope to gullible investors. Yet, after almost a decade, InterOil has no proven commercially exploitable reserves to show for it.

[Snip]

If Phil Mulacek can screw his original seed investors and his company has shown its capability to file false and misleading reports with the SEC, he is clearly capable of screwing anyone else as he and his cronies continue to sell hope to gullible investors.

Hedge fund manager Whitney Tilson is short the company and in a recent email newsletter noted that Interoil could be could be "one of the largest stock promotions ever, going on right under [the SEC's] nose..."

It is extremely unusual for a corporate spokesman of a public company to argue to the media outright that the company's stock is not undervalued. Ken Lay and Jeff Skilling used to do that in the days of Enron but, in the post-Sarbanes Oxley world, it never happens.

March 26, 2010: Before It's News - Shia LaBeouf (Wall St. 2) Caught Up In Rumors He Is Touting a Possibly Edgy Stock by "Lois Lane"

Shia LaBeouf trained at John Thomas Financial to study for his role in the upcoming Oliver Stone/Michael Douglas motion picture "Wall Street 2: Money Never Sleeps," according to Sam Antar, former Crazy Eddie fraudster, turned fraud buster.

Yesterday we mentioned that thespian, Level III CFA candidate and noted stock picker Shia LaBeouf had been talking up InterOil, an oil and natural gas exploration company. “IOC’s momentum is major, and it will surprise to the upside,” LaBeouf said in a text message to the GQ article’s author, Adam Sachs, who wrote about ShiLa’s new hobby (making it rain all from the comfort of his boxers) for the magazine’s April issue. But where did the master trader get the idea? Sure he meets with Goldman Sachs execs on the reg and is thisclose to becoming a CFA but is he really thatgood? I’d like to give him the benefit of the doubt (he’s going to be running one of the most powerful hedge funds in the world one day so trying to stay on his good side and all that) but others are thinking the budding BSD had some help from his friends at John Thomas Financial (the people who brought you the pride rally and breasts as napkins).

March 26, 2010: Business Insider - What's The Story Of Shia LaBeouf Pumping InterOil? by Lawrence Delevinge

LaBeouf and InterOil?

Earlier this week, we noted the actor's investing tips from a GQ profile, including energy company InterOil:
"Look at IOC. IOC's momentum is major and it will surprise to the upside."

Hey, plenty of people are betting on oil, so why not?

But there's a back-story to the very specific pick. As felon-turned-financial blogger Sam Antar and others have implied, the apparent reason for choosing IOC at virtual random is Shia's relationship with brokerage John Thomas Financial.

As part of his Wall Street preparation, LaBeouf spent time at John Thomas in New York to understand high finance. So good was the training, LaBeouf says, he turned a $20,000 investment into $489,000 with the help of advisers at John Thomas and others.

It's not clear if any of that investment was in IOC, which is still up nearly 150% over the past 12 months despite slipping recently. But at least knowledge and interest in the company appears to come from LaBeouf's mentors at the upstart Wall Street brokerage.

John Thomas' Wayne Kaufman has called IOC their "favorite energy stock," and the financial brokerage has a prior investment banking relationship with InterOil, via Clarion Finanz, according to Antar. (Antar has accused InterOil, John Thomas, and Clarion of a stock market manipulation scheme; in response, Thomas Belesis, CEO of John Thomas, calls Antar a liar and an "idiot.")

So who do you get your stock tips from, these days? How about 23-year-old actor Shia Labeouf? Yes, in studying for his role in the upcoming film “Wall Street 2,” Labeouf spent time at John Thomas Financial. At John Thomas, InterOil (IOC) is their “favorite energy stock.”

So guess which stock LaBeouf is praising?

“IOC’s momentum is major, and it will surprise to the upside,” texted LeBeouf to a GQ writer.
That InterOil is beset with controversy, lawsuits, and a distinct inability to find proven reserves of oil or natural gas doesn’t seem to dissuade the young actor.

When a company like InterOil starts on a corrupt foundation, everything that follows continues to be corrupt. In many ways, Phil Mulacek’s transgressions against investors remind me of me, back in my criminal days at Crazy Eddie. We both exploited the hopes of our investors with “spin and lies.” During its entire existence, InterOil has issued an endless string of press releases hyping its future prospects and selling hope to gullible investors. Yet, after almost a decade, InterOil has no proven commercially exploitable reserves to show for it.

March 26, 2010: Going Concern - Quote of the Day: Sam Antar Is Ready to Rumble by Caleb Newquist

I challenge John Thomas Financial CEO Thomas Belesis to a match on the Jerry Springer show. To even the odds, he can bring Overstock.com CEO Patrick Byrne. Two crooks versus a convicted felon born in Brooklyn. They can bring actor turned stock pumper Shia LaBeouf for added muscle, too.

This blog will continue to expose corporate misconduct in real time, just like my successful battle against Overstock.com CEO Patrick Byrne, another masquarading stock market reformer, who is now under investigation by the Securities and Exchange Commission, as a result of reporting in this blog. Recently, Overstock.com (NASDAQ: OSTK) was forced to restate its financial reports for the third time in three years, after this blog exposed GAAP and SEC disclosure violations by the company.

Phil Mulacek and Thomas Belesis need to get ready for a very long forensic accounting colonoscopy, like Overstock.com and Patrick Byrne. Pricewaterhouse Coopers (PwC) was Overstock.com's former auditors and every single financial reported audited by them turned out to be wrong because of GAAP and SEC disclosure violations. Apparently, PwC ignored management integrity issues at Overstock.com. It turns out that PwC is InterOil's auditors, too.

Shia LaBeouf

Shia LaBeouf should not let fame get to his head, unless he wants to infamously end up like Barry Minkow and me, back in the day. LaBeouf is probably a good young man and is surely a great actor with a promising career. He should stick to his acting talent instead of trying to internalize his roles in real life. Wall Street is a dirty filthly cesspool that is polluted by the likes of John Thomas Financial CEO Thomas Belesis, who uses his current claimed efforts to improve Wall Street’s image as a "wall of false integrity."

To be continued.....

Written by:

Sam E. Antar

Disclosure:

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes, simply because I could.

If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

I do not own any InterOil securities, long or short. However, I assisted Fraud Discovery Institute (co-founded by convicted felon, turned fraud fighter Barry Minkow) in researching InterOil. Barry Minkow and William Lobdell (iBusiness Reporting) have publicly stated that they have held short positions in InterOil securities.

I do not own any Overstock.com securities short or long. My research on Overstock.com and in particular its lying CEO Patrick Byrne is a freebie for securities regulators and the public in order to help me get into heaven, though I doubt that I will ever get there anyway. I will probably end up joining corporate miscreants such as Patrick Byrne in hell.

In any case, exposing corporate crooks is a lot of fun for a forcibly "retired" crook like me. Analyzing Overstock.com's financial reporting is a forensic accountant's wet dream and Patrick Byrne is about to become the SEC's new orgasm.

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“White collar crime is more brutal than violence crime. The actions of one or a few corrupt public officials and corrupt businessmen affect the livelihoods of thousands of people. Treat them with the same disdain as we do treat serial killers because white collar criminals are economic predators. We are serial economic predators." -- Testimony of Sam Antar